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PRODUCT RISK FOR EQUIPMENT MANUFACTURERS — INJURY, DAMAGE, DEFECTS & RECALL
Why Product Liability Is Different for Industrial Equipment
Industrial equipment isn’t a low-severity consumer product. A fault can cause serious injury, high-value property damage, and costly shutdowns for the end user. Claims can escalate because equipment failures rarely stay “self-contained”: an electrical defect can cause fire damage, a guarding failure can cause injury, and a control-system fault can damage the customer’s production line.
Manufacturers also face a second, separate exposure: the cost of fixing or pulling product back. Standard products liability is designed for third-party injury or third-party property damage. It does not automatically pay for your own costs to recall, repair, rework or replace products already supplied. That’s where product recall, rectification or product guarantee / efficiency-style extensions may be relevant (wording and trigger dependent).
This page explains how product liability and recall are underwritten for equipment manufacturers, what typically is (and isn’t) covered, and how Insure24 helps present your quality controls and traceability in an insurer-friendly way.
Products Liability Insurance: What It’s For
Products liability is designed to protect against legal liability arising from products you have supplied that cause injury or property damage to third parties (subject to policy terms, definitions, exclusions and territories). For equipment manufacturers, insurers also focus on where the equipment is used, how safety is engineered, and how defects are managed.
Typical Claim Triggers (Examples)
- A manufactured component fails and causes damage to the customer’s machinery
- A guarding or interlock issue leads to a third-party injury allegation
- A hydraulic leak causes property damage to the customer’s premises
- A wiring/control defect causes fire damage at the end user site
- A supplied part contributes to a wider system failure and a liability dispute
The key is that the loss is to a third party (injury or property damage). Policies vary on how “product” is defined and how completed operations are treated.
What Underwriters Usually Want to Know
- What you manufacture: machines, sub-assemblies, safety-critical parts, controls
- Sectors supplied: food, pharma, automotive, energy, construction, defence (etc.)
- Territory: UK-only, Europe, worldwide; export countries and distribution model
- Max single machine value and typical end-user environments
- Quality controls, testing regime, and change control for design/spec updates
- Traceability: serial numbers, batch records, build documentation and sign-off
Clear, consistent answers reduce quote delays and often reduce restrictive terms and exclusions.
Product Recall vs Products Liability: The Critical Difference
Most equipment manufacturers discover the “gap” only after a near miss: the customer wants parts replaced across multiple sites, engineers flown out for urgent modifications, and a controlled stop/start programme to prevent a safety incident. That cost is often not the same as a third-party injury/property damage claim.
Products Liability Often Responds To
- Third-party injury allegations
- Third-party property damage from defective products
- Legal defence costs (subject to wording)
- Settlements/judgments (subject to limits, territory, terms)
It’s about liability to others. It’s not automatically “your own cost to put things right”.
Recall / Rectification Solutions May Cover
- Recall logistics: notifications, collection, disposal (trigger dependent)
- Repair/replacement costs and engineering time (wording dependent)
- Crisis management and PR costs (where included)
- Third-party recall expenses you become legally liable for (where offered)
- Testing, inspection and verification programmes (scope varies)
Recall products vary widely. The key is what triggers cover (e.g., safety risk, regulatory requirement, or accidental defect) and whether the policy is first-party (your own costs) or third-party costs.
Common Uninsured Pain Points (If Not Structured Correctly)
- Pure financial loss claims (performance shortfall, downtime, lost production) often need different protection
- Own product repair/rework costs may be excluded unless you buy recall/rectification cover
- Contractual penalties and guarantees typically sit outside standard liability policies
- Known defects / prior circumstances are commonly excluded
- Consequential loss language in contracts can create exposures not mirrored by insurance
This is why we always align the insurance programme with your contracts, end-use and quality systems — not just turnover.
How to Present Product Risk to Underwriters (and Get Better Terms)
Product liability pricing is driven by severity and uncertainty. Manufacturers who can evidence controls, traceability and disciplined change management tend to see faster quotes and cleaner wordings.
Information That Speeds Up Quoting
- Product list and end-use summary (what it does, where it’s used, safety criticality)
- Territories and export model (distributors, integrators, direct sales)
- Turnover split by product line and territory
- Max single machine/system value and typical contract size
- Claims history plus near-misses and corrective actions
- Wording requirements from customer contracts (limits, jurisdiction, additional insureds)
The more precise the product story, the less “blanket caution” underwriters need to apply.
Controls That Often Improve Appetite
- Formal QA system (inspection records, testing, calibration, sign-off)
- Traceability: serial numbers, batch/build records, component provenance
- Change control: ECOs, revision control, customer approvals
- Documented non-conformance and CAPA process
- Supplier management for critical components and firmware/software
- Recall plan: decision tree, communications, field service capability
Underwriters like to see that you can identify affected units quickly and act decisively if there’s a defect.
Our customers wanted worldwide products liability plus evidence of a recall plan and traceability. Insure24 helped us package the QA story properly — we got cleaner terms, fewer follow-up questions, and a policy that matched our export contracts.
Quality Manager, Industrial Equipment ManufacturerFREQUENTLY ASKED QUESTIONS
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What does products liability insurance cover for equipment manufacturers?
It is designed to cover legal liability for third-party injury or third-party property damage caused by products you have supplied,
subject to policy terms, exclusions, territories and limits. It typically includes defence costs where covered by the wording.
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Is product recall included in products liability?
Not automatically. Products liability focuses on third-party injury/property damage. Recall or rectification covers are often separate
or added as specialist extensions and the trigger/scope varies significantly by insurer and wording.
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We export equipment — do we need worldwide products liability?
Usually you need cover that matches where products are sold and used. Underwriters will ask about territories, distribution model,
end-use sectors and whether you provide installation/commissioning or after-sales service.
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What’s the difference between product liability and professional indemnity?
Products liability is typically for injury/property damage claims. Professional indemnity is designed for financial loss allegations
arising from design, specification, advice or professional errors/omissions. Many equipment manufacturers need both if they design and build.
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What information helps insurers quote product liability accurately?
Product list and end-use, territories, turnover split, max single machine value, contracts and any special wording requirements,
plus evidence of QA/testing, traceability, change control and claims history (including near-misses and corrective actions).
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Can product liability sit within a combined manufacturing policy?
Often yes. Many equipment manufacturers place property, business interruption and liabilities under a combined policy, then add
specialist covers (recall/rectification, marine cargo, cyber, PI) as needed based on contracts and export profile.
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How can we reduce product liability premiums?
Improve and evidence QA/testing, maintain calibration records, implement strong change control, document CAPA actions,
strengthen supplier controls, maintain traceability, and ensure contract terms (liability caps and consequential loss wording) are managed.
Better information and stronger controls often lead to cleaner terms and fewer exclusions.